Morningstar Factor Indexes
Delivering Efficient, Strong Exposure to Industry-Standard Equity Factors
Key Features
Morningstar Factor Indexes
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Efficient, strong factor exposure
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Built for investability
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Consistent framework across factors
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Targeted Factors
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| Quality Focus on stocks with strong profitability and balance sheets. | (Small) Size Tilt toward smaller stocks, which have historically tended to outperform larger stocks. | Yield Target stocks with higher shareholder distributions relative to their price. | ||
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| Low volatility Favor stocks with low past volatility, which have historically tended to have lower subsequent risk and better risk-adjusted performance. | Value Target stocks trading at low multiples of fundamental measures like earnings, book value, cash flow and sales. | Momentum Based on short-term performance persistence, targeting stocks with strong recent performance. |
Analysis
Investable Factor Index Strategies
Indexes allow investors to research factors and, through passive investment strategies, access factor premiums in a transparent, efficient, and low-cost manner. But differences in selection rules, weighting schemes, and constraints mean that indexes targeting the same factor can diverge to a far greater extent than beta benchmarks representing the same market segment. Factor index design must strike a balance between purity of exposure and investability.”
Read the paper to discover how the Morningstar Global Factor Indexes are designed to work in practice, not just in theory.
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